Foreign Market Entry

Assignment 3

Foreign Market Entry and Diversification

Rosanne Relaford

Strategic Management – Bus 599

Strayer University

March 3, 2013

1. Create an argument for diversification of your business that will be presented to the board of directors or business investors.

We are all aware of the famous saying: “Don’t put all your eggs in one basket.” When a firm operates in many businesses, the downs in one can be compensated by the ups in another. According to portfolio theory, unsystematic risk, the risk particular to a company or an industry, can be eliminated by building a diversified basket of stocks. But the debate continues. Is it better for companies to be in many businesses or for investors to maintain a diversified portfolio? For example, as the subprime crisis grew in scale and scope, people are asking whether Citigroup, the global financial conglomerate had become too unwieldy to manage. In the case of another global bank, analysts are debating whether investment banking and wealth management can be handled simultaneously by the same organization. Similar questions have been raised about some of the other global financial services firms as well ("Managing diversification,”).

2. Develop a strategy for diversification indicating the products and industries for the diversification and how synergies may be gained from the diversified activity.

Diversification is related when a firm seeks to enter a business that, although distinct, possesses an identifiable strategic fit with its core business; in short, two businesses have strategic fit when their vale chins offer potential for synergies. Not surprisingly, diversification is called unrelated when there is no strategic fit among the diversified firm’s lines of business or meaningful value chain interrelationships ("Diversification strategy,”).

The goal of the related diversification is to exploit competitive advantages arising from the relationships between its different business...